PENALTY NOT REDUCIBLE WHEN CONFISCATION IS NOT CHALLENGED

[Mr. M. GOVINDARAJAN]

Section 111 of the Customs Act ('Act' for short) gives a list of improperly imported goods that are liable for confiscation. Sec.112 of the Act provides penalty for improper importation of goods etc., It provides that any person-

* who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Sec. 111, or abets the doing or omission of such an act, or

* who acquires possession of or is in any way concerned in carrying, removing, depositing, harboring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111

shall be liable-

* in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees whichever is greater; (i)

* in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such gods or five thousand rupees, whichever is the greater;(ii)

* in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater;(iii)

* in the case of goods falling (i) and (iii) of the above to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees whichever is the highest;

* in the case of goods falling both under clause (ii) and (iii) to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest.

Before imposing penalty reasonable opportunity should be given to the concerned person. If such person is aggrieved against the penalty imposed he can file appeal before the appellate authorities.

If penalty is imposed for confiscation the assessee may challenge the confiscation. In the absence of challenging the confiscation the appellate authorities could not reduce the penalty imposed by the lower authorities. This is well explained in the case 'IRMA IMPEX V. Commissioner of Customs (Port), Kolkatta' - 2009 -TMI - 76806 - (CESTAT, KOLKATA)
.

In the above said case the appellants imported certain goods including cosmetics which were found to be misdeclared in regard to quantity as well as in respect of value in violation of the provisions of Customs Act read with the provisions of Drugs and Cosmetics Act and Rules, the Trade Marks Act, TRIPS, Foreign Trade Regulation and Rules as also Standards of Weights and Measures (Packaged Commodities) Rules. The Adjudicating Authority confiscated the goods and ordered for destruction of certain goods on the ground that the said goods were found to be counterfeit/spurious/misbranded. The remaining goods were ordered to be confiscated and allowed to be redeemed on payment of redemption fine.

The Revenue was of the opinion that the import made by M/s Irma Impex which is a proprietary concern in the name of the wife of the second appellant, Shri Sunil Dharewa who was actually conducting the business of the importing firm. Shri Pankaj Dugar was an associate of the importing firm. As per the statement of Shri Sunil Dharewa, all the imports were made through Shri Pankaj Dugar and Shri Dharewa only invented Rs.4 lakhs. A penalty of Rs. 3 lakhs has also been imposed on the 4th appellant who is a Customs House Agent Firm, M/s Bad Organization. 

The appellants contended that the wrong consignments were sent by the exporter and so the appellants are not challenging the confiscation and their prayer is to show leniency in the quantum of penalties on the ground that majority of the goods have already bee destroyed. The 4th appellant who is a CHA firm contended that there is no finding in the impugned order regarding involvement in the misdeclaration of goods or connivance with the importer to evade payment of duty. Three bills of entry were filed by CHA firm as per the instructions and documents produced by the importer. Therefore it is prayed by the 4th appellant that the penalty imposed on the CHA firm is not maintainable.

On the other hand the Revenue contended that the goods were misdeclared in respect of value and description and also found to be totally spurious/misbranded. Therefore the appellants are liable for penalties. 

The Tribunal found that the penalties were imposed under Sec. 112 of the Customs Act for violation of the provisions of Customs Act read with other Acts and Rules. The goods imported by M/s Irma Impex were found to be mis declared in respect of value and quantity. The confiscation is not under challenge. Under these circumstances the penalty imposed on the importing firm does not require any reduction. In respect of the penalties in respect of Shri Sunil Dharewa and Sunil Dugar, the Tribunal found that Shri Sunil Dharewa was looking after the day-to-day affairs of the firm and Shri Pankaj Dugar was the person who worked on behalf of the importer. In the statement of Shri Sunil Dharewa, it was disclosed that Shri Pankaj Dugar had placed the order for importing the goods in question and Shri Sunil Dharewa only invested Rs. 4 lakhs. In these circumstances, the Tribunal found that they were liable for penalty equal to the penalty imposed on the importing firm. Accordingly the penalty imposed on Shri Dharewa and Shri Dugar is reduced to Rs. 5 lakhs. In respect of penalty imposed on the CHA firm, the Tribunal found that the brand names of the deodorants were declared in bill of entry, whereas no such brand name was mentioned in the invoice and packing list. Therefore the CHA was aware of the consignments. The Tribunal found that there is no evidence on record to show that the CHA had connived with the importer in respect of misdeclaration of consignments with intent to evade payment of duty. Therefore the penalty on the CHA is not sustainable.